Volume 73, Number 5

November 1998

Why Bankruptcy “Related to” Jurisdiction Should Not Reach Mass Tort Nondebtor Codefendants

Lori J. Forlano

Consider the following scenario: Companies X, Y, and Z all manufacture and distribute the same defective product. The product causes injuries; a mass tort litigation ensues. Company X files a petition for relief under chapter 11 of the United States Bankruptcy Code, which freezes all suits against it. Suits against Companies Y and Z are not stayed, and these companies are eager to find a way to delay suits against them, even if they cannot halt them altogether. If Companies Y and Z can argue successfully that the suits against them are “related to” the debtor’s bankruptcy, they may be able to transfer these suits to the district court where the bankruptcy case of debtor Company X is pending, unless that court abstains from hearing the case. This Note argues that the district court hearing the Company X bankruptcy petition should not assert “related to” jurisdiction over proceedings by tort plaintiffs against Companies Y and Z, the nondebtor codefendants. Exploring this jurisdictional question is not simply an intellectual exercise. Such issues have figured prominently in at least two mass tort litigations, the A. H. Robins “Dalkon Shield” bankruptcy and, more recently, the Dow Corning breast implant litigation. Both the Fourth Circuit in the Robins bankruptcy and the Sixth Circuit in the Dow Corning bankruptcy found that tort claims against nondebtor codefendants were “related to” the bankruptcy case of the debtor corporation. Part I of this Note will examine the history and present statutory bases of bankruptcy court jurisdiction, including “related to” jurisdiction. Part II will discuss the ambiguities of the various judicial standards for “related to” jurisdiction, including the Sixth Circuit’s assertion of “related to” jurisdiction in the Dow Corning mass tort litigation. Part III will illustrate why an expansive reading of “related to” as applied to nondebtor codefendants creates problems for mass tort plaintiffs and for our state and federal judiciaries. Such a reading of the relevant statutory language allows nondebtor codefendants to delay the trial of mass tort cases, making it harder for plaintiffs to continue litigating. Expanded “related to” jurisdiction also infringes on states’ rights and exemplifies why bankruptcy jurisdiction should be interpreted narrowly out of respect for Article II of the Constitution.